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J C Penney Company Inc (NYSE:JCP): Buy near $9.50 with tight stop loss

Boston, MA 09/26/2014 (wallstreetpr) – J C Penney Company Inc (NYSE:JCP) (Closed: 10.14, Down: 2.97%) opened flat but was soon dragged lower to end the day not much higher from the day low. The stock has been in a short term downtrend for the second week and shows all the signs of going much lower. The volume at 17.3 million, lower than the average of 18 million, doesn’t point to any big selloff yet but the price action remains bearish.

The stock had made a bottom at $4.90 in February 2014 and rallied fast to make a short term top at $9.28 in March. The rest of the year so far has been spent inside a broader ascending channel, though the price has made higher highs in these months. The rallies are mostly subdivided in 3 waves, instead of the 5 waves seen I the impulsive waves. This suggests a corrective nature of the 2014 rally and keeps the possibility of a major downside into consideration.

The last fall from the September high of $11.30 to yesterday’s low of $10.01 is subdivided in 5 waves, suggesting a bounce to emerge in the near term followed by another set of 5 waves on the downside. Any bounce now will face stiff resistance at $10.70 and should not touch $10.80 levels if the characteristic of the Zigzag correction is to be maintained. Interestingly, this gives us a tentative target of $9.50 on the downside where a short term bottom may take place.

The long term investors will stay away from the stock as it is yet to create any solid base that may launch the next phase of the rally. Any real secular turnaround would be signaled by a sustained break above $15, the level where the stock bottomed out in 2002, 2008 and 2009 before breaking down in 2013.

Short term investors can accumulate the stock in the band of $9.50-$10, but must keep a tight stop loss below $9.40.

Published by Viraj Shah

Viraj Shah has done M.Com (Finance) and currently pursuing CFP. He is a technical analyst who tracks US markets along with other global markets like India very closely. He is very passionate about stocks and believes that money can always be made in market.

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